Are You With Me?

Togetherness was clearly the watchword for NAR’s 2014 Leadership Summit.

NAR President-elect Chris Polychron

Every August, incoming state and local REALTOR® association presidents from around the country and their association staff executives get together in Chicago to address major industry challenges.

At this year’s summit, Aug. 18-19, NAR President-elect Chris Polychron set the tone with his opening remarks, forcefully asserting REALTORS®’ role as the first point of contact in a real estate transaction. Polychron garnered huge applause while repeatedly asking the audience of 1,500, “Are you with me?” Later, audience members participated in a collaborative songwriting project, creating a song with the lyrics, “We have the knowledge. We are your voice. I’m a REALTOR®, your No. 1 choice.” The following day, a panel of top industry executives echoed Polychron’s sentiments, reminding the audience that the cooperative model built by REALTORS® is the envy of the world.

Polychron emphasized the critical importance of protecting the integrity of listing information online, and asked for the help of the board presidents, MLS professionals, and association executives to take on the challenges of the day.

“We are in this together. We are the group who can get this job done,” he told the crowd assembled at the Sheraton Hotel and Towers on the banks of the Chicago River. “There is no ivory tower. We can’t afford to have any distance between our national leadership and state and local leadership.”

On the latter point, Peltier was particularly vociferous. “Why is every question about what’s going on in the real estate business talking about what Zillow and Trulia are doing?” asked Peltier, chairman and CEO of HomeServices of America Inc. “They’re not in the real estate business!”

Alex Perriello, president and CEO of Realogy Franchise Group, directed brokers in the audience to take the technological bull by the horns. While many complain about the way their listings look on third-party sites, he said, they often don’t do enough to differentiate their own site to optimize the presentation of listings.

“Why not have a hundred more photos, and a video tour? It’s a great opportunity,” Perriello said.

Perriello added that differentiation should also extend to the franchise level. He says that real estate associates and companies considering a partnership with Realogy are often encouraged by many the tools the franchise provides.

“They have to feel better off with us than without us, [and] the value proposition continues to change with technology,” Perriello said. “Once you get everyone on a common platform, innovation becomes a lot easier.”

Talk of a common platform quickly segued into a discussion of how many MLSs each of the large brokers had to join—and each of the panelists, at some point in the discussion, expressed support for MLS consolidation.

“It certainly makes sense for MLSs to start consolidating,” Peltier said. He suggested several smaller MLSs from the same region could partner to create “a consumer site that does not pick winners and losers,” referring potential clients back to the listing broker’s site.

Perriello caused a stir in the audience when he suggested that MLS consolidation should happen “through acquisition,” with larger MLSs taking over smaller ones that aren’t able to adapt.

“It is an exit strategy for some of them,” he said. “People won’t voluntarily say, ‘Well I think we’ll just close up shop.’”

Perriello reminded brokers that they can leverage a history of cooperation that real estate professionals in other countries can only dream of.

“The majority of brokers around the world do not have the benefits of MLS,” he said. “Competitors don’t even talk to each other much less cooperate with each other.”

Hugh Kelly, CRE, chair of NAR affiliate the Counselors of Real Estate, encouraged attendees to think deeply about how they can help energize human capital in their organizations. “Data is not knowledge… [and] what REALTORS® have to contribute is knowledge,” he said. “At its root, real estate is a people business…. We need to think about how we can most effectively organize intellectual capital.”

Brokers can benefit immensely in the knowledge department through greater association involvement, said Casey, president of Howard Hanna Real Estate Services. As the chair of the 2014 Large Firm Involvement Advisory Board, Casey said she’s able to tap into industry news well ahead of her colleagues.

“It amazes me continually when my local board sends me something I knew about two months ago,” Casey said. “All of us benefit from the committees we’ve served on… There should be a system where we share this.”

“It’s a very great power we all have together,” Casey added. “We have to be supportive of each other.”

For its part, the audience was equally tuned in to both the need for change and the ability to partner up to accomplish it. During the panel, Swanepoel asked audience members to text their responses to two survey questions. Seventy-one percent of the respondents agreed that “REALTOR® associations and MLS organizations are at a tipping point,” and 86 percent voted in favor of the idea that “the people in this room, by working together, can make a difference.”

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The natural play is to consolidate because the members would better services, the customer would have a better experience, and the stronger MLS’s would have more revenues to put back into the wheel.

However, the smaller MLS’s have their own beliefs which affect their attitudes and ultimately make the decision to merge or consolidate. Those beliefs were created by leadership upon origination and still remain with the leadership who governs until new insight makes it way into the decision making team.

If the larger MLS’s want to consolidate they will need to ultimately change the beliefs (what’s in it for them) for the smaller MLS’s. This comes down to three questions for the smaller MLS’s.

Is the consolidation serious?
The merger will need to dramatically improve the customer experience, member experience, and protect the existing leadership. On a scale of 1-5 according to the smaller MLS how serious of an issue is this right now?

Is the consolidation urgent?
If the MLS’s don’t merge now then will they still be able to do business as usual. On a scale of 1-5 according to the smaller MLS how urgent is that they merge right away.

Is there opportunity for growth?
If the MLS’s merge will the smaller MLS have a larger opportunity to grow their inventory of services, market reach, and impact or is growth not something they are concerned about.

It doesn’t matter so much what the bigger MLS’s want or the members of the smaller MLS’s want. It’s up to the leadership of the smaller MLS’s to rank their importance whether this concern is serious, urgent, and there is an opportunity for growth.

That’s a great speech and on the right track. I am hopeful the people in the room can work together to make a difference. I’m more excited about the idea of better promotion of human capital than a single focus on technology and consolidated systems to thwart third-party sites.

The value added role of REALTORS is shifting from an emphasis on identifying properties to helping clients make the best choices and guiding clients through the process to a successful, confident conclusion. That is where the core value proposition lies that consumers could better understand about us.

Talk is cheap and associations move like turtles. The question is “When do we see an action plan that outlines the direction we are heading and the deliverables we can expect? ” I would really like to see NAR engage a premier consulting firm like McKinsey and Company to help us with understanding our business and help set our direction.

As with most acquisitions, there are benefits, and consequences to the lower levels, that frequently do not affect or reach the top levels. Although there would most likely be additional services available, you could imagine that the cost to provide those benefits would most certainly go up. Zillow/Trulia acquisition is a perfect example. Although agents were hearing, “Oh nothing will change after the acquisition,” many have already received a notice that he or she owned 50% of a market last week, and this week now own 25% for the same price.

Real Estate is already an expensive proposition. In today’s market place it is already difficult for independent agents to get their Real Estate business going if they are not part of a team. Larger fees for Association dues, and MLS access would certainly further discourage new agents from coming into the industry. I believe that competition between MLS Boards enables prices to stay competitive, and encourages innovative thinking and new ideas that may not be addressed in a larger arena of a super size MLS.

I agree with Michelle that it is difficult for independent agents to get their business going. Clearly the Internet phenomenon coupled with electronic signature and e-mail has lowered the labor cost of representing clients. It is most obvious competition for new listings is resulting in lower fees. Most new agents are trained to focus on listing homes to gain first-hand experience and develop inventory to attract buyers. An inability of new agents to capture this side of the business is a barrier to entry and benefits experienced agents, teams, and established firms greatly.

It is no doubt that MLS Associations, MLS providers, third-party’s such as Zillow, realtor.com, Truila etc. are dependent on new agents to maintain their current presence and fuel growth. I think of this as the gold rush effect – Merchants selling shovels and pans to Gold-miners made a lot more money in the California Gold Rush than did the Gold-miners ever during the gold rush. My view is large national real estate firms such as Realogy, third parties, Realtor.com, Zillow, Trulia, local associations are to highly dependent upon selling shovels and pans and the business model has yet to prove it supports the revenue base they have captured and certainly will not ever support the revenue the public companies predict they can capture. Look at the Realogy IPO, The two main revenue streams were almost identical, commissions and desk fees. This boldly confirms we are in an industry that places too much focus on promoting and exploiting the least experienced Agents. It is no wonder consumers are fed up with poor service, sub-par data quality, and high fees.

I believe we are truly at an inflection point. Consolidation is bound to happen at many different levels, local associations, third-parties, and agents. All driven by falling delivery costs granted by technology. Why should our industry be any different than any other impacted by the internet?